University of Oxford
I am pleased to introduce the June 2021 issue of The Journal of Computational Finance.
In this issue’s first paper, “Pricing American options under negative rates”, Jherek Healy analyzes the upper and lower exercise boundaries for American puts under negative interest rates (compared with the single upper boundary found with positive interest rates). He proposes a numerical method for the resulting integral equation by a careful modification of the approach proposed by Andersen, Lake and Offengenden in their paper “High-performance American option pricing” (The Journal of Computational Finance 20(1), 39–87 (2016)).
Our second paper, “Fast pricing of American options under variance gamma”, finds Weilong Fu and Ali Hirsa introducing a novel method for the valuation of American options that combines a partial integro- differential equation in a jump model with kernel regression to estimate corrections to certain semi-analytical approximations.
In the issue’s third paper, “The effects of transaction costs and illiquidity on the prices of volatility derivatives”, Mehzabeen Jumanah Dilloo and Yannick Désiré Tangman propose a numerical approach to price volatility options under different transaction cost models.
In our final paper, “A simple and robust approach for expected shortfall estimation”, Zhibin Pan, Tao Pang and Yang Zhao combine a normal approximation with corrections for skewness to estimate risk measures under a heavy-tailed distribution.
I hope you will find the novel findings presented in this issue of interest, and I wish you an enjoyable summer.
This paper derives a new integral equation for American options under negative rates and shows how to solve this new equation through modifications to the modern and efficient algorithm of Andersen and Lake.
This research develops a new fast and accurate approximation method, inspired by the quadratic approximation, to get rid of the time steps required in finite-difference and simulation methods, while reducing error by making use of a machine learning…
This paper employs a PDE approach to price several volatility derivatives under different transaction costs and illiquidity models.
This paper proposes a simple and robust expected shortfall estimation method based on the tail-based normal approximation.